National Australia Bank (NAB) has expressed interest in acquiring the banking business of insurance group Suncorp, Australian Financial Review has reported. 

According to the publication, NAB has informed Suncorp’s leadership that it is interested in acquiring the regional lender should it become available. 

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The deal could add around A$60bn ($41.2bn) in loans to NAB’s balance sheet and strengthen its presence in Queensland, the third-largest retail banking market in Australia. 

For Suncorp, the divesture of the banking business would mean becoming a pure-play general insurer. 

It would also release an estimated A$5bn ($3.43bn) in the capital, which the insurance firm can use to reinvest in its core business or return to shareholders.

As per the report, the lender has approached Suncorp at the ‘highest’ level to let the insurer’s board know a big player would be interested if they decide to sell the bank. 

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NAB’s expression of interest comes as the insurer’s board faces pressure from investors and the management to find growth in the banking arm or sell it to the bigger players. 

Investors believe that Suncorp’s banking business is sub-scale and eats into the value of its insurance arm. 

Over the past decade, Suncorp has tried to sell the banking business but ended up holding on to its “bancassurance” model. 

If the insurer puts up the banking arm for sale, it will attract interest from major banking players in the country. 

However, given NAB’s recent performance, it is in the best position for the deal, said AFR. 

In November 2021, the Australian lender secured a regulatory nod to buy Citi’s retail operations in a deal valued at $880m.